California state lawmakers to consider plan to roll back public employee pensions

by Julie Small

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In Sacramento tomorrow, state lawmakers wade into a plan to reform public pensions. An independent state agency charged with improving government programs recently called on lawmakers to freeze current retirement benefits and switch to cheaper plans.

The Little Hoover Commission maintains that lawmakers should give state and local governments legal authority to freeze public employee pension benefits. That would allow governments to enroll current employees in lower-cost retirement plans.

The commission suggests a hybrid model the federal government adopted decades ago. It combines what's called a "defined benefit plan" – in which the employee's retirement payout depends on salary history and seniority – with a 401(k)-style retirement account in which employers match employee contributions.

Extending Social Security benefits to teachers, police and firefighters would also help, the commission said. It advised the state government to cap the salary that can be used to calculate benefits at $80,000 or $90,000, and to increase the age at which those workers become eligible for benefits – it’s down to 55.

Without changes like that, the Little Hoover Commission predicts that “pension costs will crush government.”